If you’re like most commercial real estate investors looking for big profits from commercial property investing, then you want to invest in high demand areas, or areas that are soon to be in high demand. The question is, how do you find out whether the property you’re considering is located in a high demand area and whether the area will continue to be in high demand in the future?
Here are 3 critical market indicators to seek out to help you identify high demand areas.
Demographics: Commercial property investing is really all about space investing. What that means is that you are buying, selling, or leasing space that you think the general population as well as office and industrials workers not only want, but need. Take a look at the number of households, people, and businesses residing within 3-5 miles of your property. The more the better.
Income: To market, sell, and lease your space, you need paying customers. That means the more paying customers you have within 3-5 miles of your property that earn enough money or generate enough in sales to pay for your property, the better. For example, when I’m evaluating a high demand apartment rental market, I will look for median household incomes of $42,000 or better. That’s because residential tenants will spend about 1/3 of their income on housing. I’m looking for tenants that can afford at least $12,000/year.
Infrastructure: Airports, highways, railways, ports, area amenities are all critical indicators for high demand areas. People want to live, work, and sleep where access is easy and amenities are available. If you’re looking at an apartment community 1 hour from any Walmart location, you might want to reconsider how “in demand” that are might really be.
Entire college courses are taught on this topic, but if you have 3 of these critical high demand area indicators within your scope, you’re off to a great start. And when you think of it, property investing in high demand or up and coming high demand areas is lot like playing hockey. As the great Wayne Gretzky said when asked about being a master player, he said, “Skate to where the puck is going to be.”